2024 (8) TMI 262 - AT - Service Tax

Short payment of service tax - Transport of Passengers Embarking in India for International Journey by Air Service - HELD THAT - The Passenger Service Fee (PSF) and Airport taxes collected by the Appellant is under an obligation in connection with operations of its business and not towards providing of the taxable service as a service provider and for this reason the amount so collected is booked as a liability in their books of accounts which gets reduced when the payment is remitted to the airport authorities on whose behalf it has been collected. It is coming out from the SCN that with respect to remaining two heads i.e Fuel and Insurance Surcharge an amount of Rs. 23,02,960/- has already been paid by the appellant alongwith the interest as is recording in para three of the SCN. However, none of the Adjudicating Authorities below have taken note of this amount and the demand on four of the heads has been confirmed. The Commissioner (Appeals) has remanded the matter directing the adjudicating authority to re-calculate the demand of Service Tax in the light of the findings arrived at by the Commissioner (Appeals) and to rework the demand alongwith the interest - Appeal allowed by way of remand.

Summary

Issues:
1. Service tax liability on different heads collected by the appellant.
2. Failure to discharge service tax liability on certain amounts.
3. Appeal against the order imposing penalty.
4. Interpretation of Passenger Service Fee (PSF) and Airport taxes.
5. Adjudication of the demand for service tax.
6. Applicability of previous tribunal decisions on similar cases.

Analysis:
1. The case involved the appellant, an international air carrier, engaged in providing services for international air travel. The Department alleged that the appellant had short-paid service tax on various amounts collected from passengers, including Basic Fare, Fuel Surcharge, Insurance Surcharge, PSF, and Airport taxes.

2. The Department issued a Show Cause Notice proposing a recovery of Rs. 29,78,023 along with interest and penalties under sections 76 and 77 of the Finance Act. The Order-in-Original confirmed the proposal, leading to an appeal that was rejected by the Order-in-Appeal.

3. The appellant contended that the PSF and Airport taxes collected were not towards providing taxable services but were obligations related to their business operations. It was argued that the amounts collected were booked as liabilities and reduced upon remittance to airport authorities.

4. The Tribunal noted that the appellant had already paid Rs. 23,02,960 for Fuel and Insurance Surcharge, which was not considered by the Adjudicating Authorities. The Tribunal referred to previous decisions regarding PSF and Airport taxes, emphasizing that these charges were for services provided by the Airport Authority to passengers and operators, not for services rendered by the appellant.

5. The Tribunal agreed with the appellant's defense, stating that the PSF should not be included in the taxable value as it could lead to double taxation. The Tribunal found the demand for service tax unsustainable and set aside the order imposing penalties and interest.

6. The Commissioner's decision to remand the matter for re-calculation was deemed unnecessary in light of the Tribunal's findings. Consequently, the order was set aside, and the appeal was allowed based on the previous tribunal decisions and the interpretation of the relevant legal provisions.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's reasoning in deciding the appeal on the merits.